The UAE’s retirement income system has been ranked for the first time alongside long-standing pension schemes such as the United States, France and Spain.
The UAE’s ranked 22nd globally in the 13th Annual Mercer CFA Institute Global Pension Index (MCGPI) and follows the launch last year of the Dubai Retirement Visa, which aims to encourage expats to settle in the UAE after they give up full-time work.
Retire in Dubai, the first of its kind in the region, is spearheaded by Dubai Tourism in collaboration with the General Directorate of Residency and Foreigners Affairs (GDRFA-Dubai).
In its initial phase, the programme focuses on UAE residents working in Dubai who have reached retirement age. Eligible applicants will be provided a retirement visa, renewable every five years.
The retiree can choose between one of three financial requirements for eligibility: earning a monthly income of AED20,000 ($5,500); having savings of AED1 million ($275,000); or owning a property in Dubai worth AED2m ($550,000).
The MCGPI is a comprehensive study of global pension systems, accounting for two-thirds of the world’s population. It benchmarks retirement income systems around the world highlighting some shortcomings in each system and suggests possible areas of reform that would provide more adequate and sustainable retirement benefits.
It said the UAE system scored among global peers across three key areas of focus – adequacy, sustainability and integrity.
Within the UAE, pensions of Emiratis are governed by different agencies such as the Abu Dhabi Pension Fund (ADPF), Sharjah Social Security Fund (SSSF) and the General Pensions and Social Security Authority (GPSSA).
The UAE’s pension adequacy rankings are supported by country’s generous retirement benefits, which ensure a continued income to sustain a good quality of life with a suitable minimum pension relative to earnings.
The UAE also scored well in terms of sustainability given its high labour force participation rate, especially for individuals over the age of 55.
Hazem Abdel-Rahman, Mercer’s retirement business leader for the Middle East, said: “The UAE has a robust pension system in place for Emiratis, which is highlighted by its entry into our annual MCGPI survey ranking alongside many peers that have more established systems. It is notable that the UAE’s retirement benefits are well governed and provide a sufficient income to pension recipients.
“With that said, as life expectancy continues to rise, the UAE may benefit from increasing the retirement age; this is a step many countries have already taken to ensure the ability to provide for aging and future generations. Furthermore, introducing private pension plans as a complementary retirement program will reduce the pressure on the social security programs in the country and enhance the overall retirement income.”
While the UAE ranks alongside global peers, the report identified a few key areas that require development in the country’s pension system, including introducing a minimum access age to an individual’s retirement benefit, and increasing the state pension age in response to the country’s life expectancy.
William Tohme, senior regional head of Middle East and Northern Africa (MENA) at CFA Institute, said: “The concerted efforts by the UAE Government over the past few years demonstrate a robust pension system in place in the country which is underpinned by strong governance and international best practices.
“We are confident that the recently launched ‘UAE Next 50’ initiative, premised on socio-economic transformation, will further act as a catalyst for pension reforms both in public and private sectors. In order for the UAE to improve they need to implement reforms and more compensation measures to incentivise its pension system to balance its aging and retirement ratio.”
By the numbers
- The UAE had an overall index score of 59.6, ranking 22nd on the list.
- The country scored 59.7 in adequacy, due to the generous retirement benefits with suitable minimum pensions relative to earnings.
- Driven by the labour force participation rate, especially for individuals over the age of 55, the country scored 50.2 in sustainability.
- The country scored the highest, 72.6, in integrity, owing to the strong governance structure around the pension system.
- Globally, Iceland had the highest overall index value (84.2), closely followed by the Netherlands (83.5) while Thailand had the lowest index value (40.6).
Compared to 2020, China and the UK showed the most improvement as a result of significant pension reform, which improved outcomes for individuals and pension regulation.
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